Spain's ongoing recession was confirmed on Thursday after official figures
showed that the economy shrank by 1.4pc in 2012.

The eurozone's fourth largest economy contracted for the seventh straight quarter in the final three months of 2012, shrinking by 0.8pc as the recession worsened by more than previously estimated.Photo: Reuters

The eurozone's fourth largest economy contracted for the seventh straight quarter in the final three months of 2012, shrinking by 0.8pc as the recession worsened by more than previously estimated

Output shrank by 4.7pc, due to a fall in domestic demand, while exports grew by 2.8pc over the quarter, Spain's National Statistics Institute said on Thursday. Economists had expected output to decline by 0.7pc in the three months to the end of December.

“The key numbers are consistent with very weak survey data,” Guillaume Menuet, senior economist at Citigroup, told Bloomberg. “It is about time the real economy numbers match the challenged picture which has become the mark of many countries across Europe including Spain in the last three to six months as across-the-board austerity damages growth.”

How Spain's economy has fared compared with the EU and eurozone average (source: INE).

Spain's prime minister Mariano Rajoy has indicated that the economy will continue to contract throughout the first half of 2013.

“The most important of Spain’s goals are economic growth and creating jobs,” RMr Rajoy told the Spanish parliament on Thursday, as he said that Spain's deficit had narrowed to 6.7pc of GDP in 2012 from 8.96pc in 2011.

Spain is currently committed to reducing its deficit to below the 3pc of GDP limit for the EU countries by the end of 2014.

Separately, nationalised lender Bankia posted record losses of €19.2bn (£16.6bn) in 2012, the biggest ever recorded by a Spanish company.

The figure was just above the €18bn the banking group had been granted in bail-out funds. A statement said the bank and its parent group BFA booked provisions of €26.8bn in 2012.

Bankia was formed in 2010 by merging seven savings banks. Back then it was one of Spain's top financial entities and heralded as the solution to the country's banking problems following the collapse of the once-booming real estate sector in 2008.